A record amount of $4.6 billion has been sent abroad by Indians who availed themselves of a facility which gives them the permission of sending money out of the country in the form of a gift for relatives or maintenance, for purchasing property and making investments overseas with absolutely no query.
The facility under which the transfer is done is referred to as LRS (Liberalised Remittances Scheme) and it permits inhabitants for remitting abroad $250,000 yearly. Quite surprisingly, this reached a record amount of $4.6 billion which is much higher than $1.6 billion last year.
A sudden rise is apparently visible when the monthly trend of remittances from June 2015 was analyzed. It shows that the remittances have crossed $400 million mark from almost $100 million per month.
The two categories under which the outflow is maximum are “study abroad” and “maintenance of close relatives”. They account for more than half of the total outflow carried under different categories since June 2015 and nothing can be clearly explained as to why this has happened.
The economists are of the opinion that the Indians who have relatives or connections overseas are making high remittances because of depreciating Indian currency, tough laws of taxation in nations like the United States and lastly, a higher remittance limit.
In the words of SBI’s chief economic advisor, SK Ghosh, “All these portend towards the increasing propensity towards foreign consumption rather than towards saving.”
He further strengthens his statement by stating the negative correlation of 0.39 which is between growth rates of outward remittance under LRS scheme and bank deposits.
As per RBI, the chief reason of this rise is that range of LRS has been increased in May 2015 for permitting higher limits under the two categories mentioned above.
Previously, this outflow used to take place under different categories. In September 2013, the limit of remittances had been decreased; however, it was increased and fixed at $250,000 per person annually in May 2015. Hence, these outflows are nothing but balance of payments neutral.
Do you guys think that this sudden increase in remittance indicates towards anything related to black money? If so, how? Share your views in the comments section below.
